China is the toy-making capital of the world, sending $10 billion worth of toys around the world each year. Now, China is also becoming a toy-buying country.

Christmas is coming and children are begging their parents for the season's hottest toys. In Hong Kong, two little Chinese boys, both six years old, are very excited as their mothers take them to the Hong Kong branch of one of the world's leading toy retailers, Toys R' Us.

One boy browses the long rows of ceiling-high shelves packed with toys, and comes to a halt. His eyes are fixated on a pile of Robosapiens. He walks over and picks one up.

The boy says he wants this robot for Christmas because it fetches things for him. As he orders the toy around, his cousin grabs the remote control from him, eager to get a piece of the action. They start to scuffle.

Indeed, the burping, kung fu-fighting robot has won the hearts and minds not only of six-year-olds, but also of adults. Designed by a former physicist, Robosapiens performs 67 functions on command, including talking, grunting, roaring, rapping music, and passing gas.

Wow Wee, a Hong Kong company, produces Robosapiens in China. Philip Duffy, Wow Wee's head of design, explains how the company has managed to sell more than a million Robosapiens since introducing it in April.

"We started to fulfill that one dream out of the 20th century that wasn't fulfilled, you know," he said. "The whole concept of having robots was promoted all the way through the 1950s to nowadays. So far no one's actually made that step to get robotics into our home in a must-be-used kind of way, apart from us."

Hot items for girls this season include the ever-popular Barbie fashion doll line and Barbie's pouty-lipped arch-rivals, the Bratz dolls.

And where are all these toys coming from? Kids around the world have visions of toys made by elves at the North Pole, but Santa's helpers actually live in China. The country produces and exports 70 percent of the world's toys - more than $10 billion worth of toys.

Steven Kahn is the managing director of games and toys trader Mannix Company. He says the reason toymakers use China as a manufacturing base instead of the North Pole is simple.

"It has to do with labor costs," he explained. "It's all cost. Bottom line for everything is cost."

China's toy industry ran into a few problems this year. The record high cost of oil drove up prices for plastic and electricity, raising manufacturing costs. New regulations regarding dangerous toys and pirated intellectual property rights cut into China's sales.

Despite these problems, and despite the availability of affordable labor in other countries, China remains the top toy-maker.

"Frankly speaking, Mexico tried to lure manufacturers over there about 10 years ago, as did the Philippines. But because of instability of the government and graft and other problems, and [the] work ethic, it became not worthwhile," said Mr. Kahn. "India could be a place in the future with low cost, but the other thing also has to do with standards of labor."

The manager of a Christmas items factory in China's Jiangsu province, who asked that his identity be kept secret, says preparing for Christmas takes months.

He says people don't realize that many Christmas product manufacturers receive their first orders in May, and are expected to have the items completed by July.

China has been a major toy-maker since it began handling orders from Hong Kong companies more than 20 years ago.

As China's economy booms, it is also starting to import toys for its own children. According to the China Toy Association, the country's toy imports grew 30 percent in each of the past two years, to $292 million last year. The biggest obstacle to the growth of the domestic market is price: foreign-made toys are still too expensive for the average Chinese consumer.

But Mr. Duffy of Wow Wee says spending habits in China are changing.

"Previously, when we came out with expensive items, the China market would look at our stuff and maybe order some test numbers," he said. "Nowadays we're definitely getting a lot more interest because the dollars are there in China."

The Toy Association says the average toy consumption of Chinese adolescents is only between $2.5 and $3.5, while the average for Asia as a whole is $13.

And, urban residents, who make up about a third of the population, have seen incomes rise rapidly over the past decade. Millions of urban parents, limited by China's population policy, have just one or two children, meaning they are willing to spend more on toys.

Rose, a 30-year-old from Shanghai on a visit to Hong Kong, provides a hint at what the future might hold.

She says she snapped up two Robosapiens as soon as she spotted them at Toys R' Us in Hong Kong, because they were much cheaper back in Shanghai. How much did she pay? $90 each.

With that kind of cash, China's domestic toy sales are likely to bring joy to the country's toymakers in the coming years.